Bitcoin fund plan gets thumbs-down from experts

A plan to create the first ever exchange traded fund (ETF) in the 'virtual currency' Bitcoin has been greeted with scepticism by two prominent professors.

 Bitcoin fund plan gets thumbs-down from experts


A plan to create the first ever exchange traded fund (ETF) in the ‘virtual currency’ Bitcoin has been greeted with scepticism by two prominent professors.

A plan to create the first ever exchange traded fund (ETF) in the ‘virtual currency’ Bitcoin has been greeted with scepticism by two prominent professors.

Bitcoin is a virtual currency not linked to any central bank or government. It is accepted by a limited number of online retailers.

The Winklevoss brothers, who helped to create Facebook, hold $10 million (£6.6 million) of Bitcoin and have announced plans to create an ETF that allows investors to bet on the future value of Bitcoin without buying the currency directly. They plan to raise $20 million from investors.

Professor Campbell Harvey, an expert in international business at the Fuqua School of Business at Duke University, said that the idea of investing in a Bitcoin ETF is laughable.

‘Bitcoin does not have any tangible backing to it,’ said Harvey, ‘so the idea of an ETF investing in Bitcoin is about as far away from the idea of value investing as you could get.’

His comments were echoed by Professor John Rusham of Warwick Business School, who is an ex-managing director of BlackRock.

He said, ‘The less people think of Bitcoin as a “get rich quick” investment, the better its chances of survival. For its own sake, it needs publicity for its qualities as a neutral and universally accessible currency with a transparent exchange rate and immunity from central bank manipulation.’

Rushman added, ‘It will be interesting to see how many investors it attracts, as it would seem that anybody keen on Bitcoin as an investment will already hold them. Why would someone want a security offering all the same risks as the Bitcoin, but with an extra layer of management and fees inserted?’

The virtual currency has become progressively more popular since the financial crash and its proponents say it will revolutionise banking. It is created by the application of a mathematical formula and was invented four years ago by a person or group using the name Satoshi Nakamoto. The price of Bitcoin, which is limited to 21 million in circulation, has swung between $14 and $266 this year.

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